You must be at least 18 years old to open your own credit card account. However, you only have to be 13 to become an authorized user. If you’re interested in applying for a line of credit on your own or as an authorized user, keep reading to learn the basics of revolving credit accounts and what you need to qualify.
What Is a Credit Card?
A credit card is a financial tool that allows a borrower to make purchases using a plastic or metal card. While a debit card uses money from the borrower’s checking account, a traditional credit card borrows from a predetermined credit limit. The average American has three credit cards in their name.1
These are a few different types of cards available:
- Rewards credit card
- Student credit card
- Travel credit card
- Business credit card
- Secured credit card
Credit card companies issue credit cards based on specific financial requirements. When someone submits an application, the financial institution does a credit check to determine approval, the interest rate, and the maximum limit.
Responsible Credit Card Usage
A borrower uses a credit card just like a debit card. The card can be swiped, tapped, or inserted into a payment terminal, or used online to purchase goods and services. The borrower is expected to repay the card monthly. However, the borrower has various options for repayment.
Cardholders can pay the minimum amount required by the bank, or as much as they desire. But while it’s convenient to only pay the minimum, financial experts advise borrowers to pay the full statement balance (amount shown on the monthly billing statement) so the debt does not grow into an unmanageable amount.
Here are 5 tips to ensure you use a traditional credit card responsibly:
- Don’t use more than you can afford to repay.
- Never skip or forget to make a payment.
- Pay more than the minimum each month.
- Avoid using more than 30% of your limit.
- Use a rewards card instead of a standard credit card.
Credit Card Financials
The interest rate on a credit card, often referred to as the Annual Percentage Rate (APR), varies depending on the card issuer, your creditworthiness, and the type of credit card you have.
The average credit card interest rate is 21%.2 However, some cards offer lower introductory rates for a certain period, while others have higher rates for cash advances. As for fees, credit cards may come with various charges, such as:
- Annual fees
- Cash advance fees
- Balance transfer fees
- Foreign transaction fees
- Late payment fees
It’s crucial to read your card’s terms and conditions to fully understand all potential charges. Based on 2022 data from the Federal Reserve and the U.S. Census Bureau, the average American has $7,951 in credit card debt.3 There is no right amount of outstanding debt to have. The most important factor is that you can comfortably repay your debt and other necessary expenses.
Credit Card Benefits and Drawbacks
|Benefits of Credit Cards
|Drawbacks of Credit Cards
|Convenience: Credit cards are widely accepted and easy to use, making transactions quick and seamless.
|Debt Accumulation: It’s easy to spend beyond your means, potentially leading to high-interest debt.
|Security: Offers more security than cash in case of theft or fraud. Most companies offer zero-liability protection.
|Fees and Interest: Missing payments or carrying a balance leads to interest charges. Annual fees can also add up.
|Credit Building: Responsible usage helps build your credit score and credit history.
|Credit Score Damage: Irresponsible use can negatively impact your credit score.
|Rewards and Perks: Many cards offer rewards programs that provide cash back, points, or travel miles.
|Temptation to Overspend: Rewards programs can encourage more spending.
|Emergency Coverage: Can be a financial lifeline in case of emergencies.
|Complex Terms: Some cards have complex terms and conditions, making it easy to incur unexpected charges.
|Global Usage: Ideal for international travel or online purchases from foreign websites without the need for currency exchange.
|Potential for Misuse: Risk of fraud or unauthorized use if card details are compromised.
Age Requirements for Credit Cards
You may ask, “How old do you have to be to get a credit card?” According to modern law, borrowers must be at least 18 years of age in order to get a credit card account.
It is actually illegal for credit card companies and other lenders to approve loans or lines of credit for individuals who are under the age of 18. However, there are still some ways younger adults can start using lines of credit.
How To Get a Credit Card if You Are Under 18
How can you use a credit card if you are under the age of 18? While you can’t have your own credit card if you are underage, you may be able to use one under the account of another established borrower.
- Become an Authorized User — Authorized users have access to a credit line linked to another primary cardholder’s account. Authorized users can make purchases but the primary account holder is responsible for paying the balance on the authorized user’s behalf.
- Get a Secured Credit Card — Some lenders allow minors to have secured credit cards. A secured card differs from an unsecured card in that the credit limit is prepaid. Since the credit limit for secured cards is paid upfront, there is very little risk of accumulating too much credit card debt.
What Are the Requirements To Get a Credit Card?
The basic requirements for most credit card issuers are:
- Applicants must be 18 years of age or older.
- Applicants must have reliable independent income.
- Applicants must provide an SSN or ITIN.
If an applicant meets those basic requirements, chances are they will be able to find approval from some sort of credit card. Lenders will also do a hard credit check to determine approval, interest rates, and other funding details.
How Does Your Credit Score Affect Approval for a Credit Card Account?
There are five main categories credit bureaus collect data on to compile your credit score and determine your credit score.
Payment history includes paying bills and other financial obligations on time, like credit card balances. How on time you are with making payments is the most influential factor that goes into your credit report. Missing just one monthly payment on your credit card can negatively affect your credit score for up to seven years!
Credit bureaus also look at what kind of financial accounts you have. Generally, a mix of accounts is preferable. For example, having lines of credit, installment loans, payday loans, secured loans, etc. A credit mix shows that you are capable of responsibly managing your debt.
Length of Credit History
One of the financial factors that contribute to credit scores is the length of financial history. The longer you’ve had an open financial account in your name, the more your credit score will benefit.
How much good debt vs bad debt you owe also contributes to your credit score. This means if you have a large outstanding balance on your credit card, you may see your credit score suffer because of it.
Hard Credit Checks
Every time you apply for loans or credit cards, lenders perform a hard credit check. Hard credit checks are a formal inquiry into your credit profile and are kept track of by credit bureaus. So, if you apply for too many lines of credit you aren’t qualified for, you may find that applying for credit cards hurts your credit.
How To Establish Credit History if You Are Under 18
The sooner you can start establishing a credit history, the better. Below are a few tips on how minors can start generating their credit history as quickly as possible.
Secured Cards / Authorized Users
As discussed, having a secured card or being an authorized user allows young adults access to credit cards. Additionally, when used responsibly, these financial products can help young adults build credit and start establishing a healthy financial history.
Get a Checking Account & Savings Account
It is also a good idea to open a bank account for a young adult as soon as possible. While a minor may not have their own checking account, they may have what is called a custodial account. A custodial account essentially functions exactly like a regular bank account, except a custodial account is under the control of someone over the age of 18 on behalf of a minor.
FAQs About Getting and Using Credit Cards
Set a realistic budget and stick to it, keeping your credit utilization low. Set up automatic payments to avoid late fees, and review your monthly statements for accuracy. Don’t hesitate to contact your issuer if you have questions.
Secured credit cards can help build or repair credit scores, as they require a deposit that secures your line of credit. They’re a great option if you’re new to credit or are looking to improve your score.
While student credit cards are a fantastic way to start building credit, they often come with higher interest rates and lower credit limits. Also, inexperienced users might find it tempting to spend beyond their means.
Interest rates are the cost of borrowing money. If you don’t pay off your full balance each month, you’ll be charged interest on the remaining amount. This interest compounds, so over time, you could end up owing much more than you originally spent.
Consider your lifestyle and spending habits. If you’re a student, student credit cards might be beneficial. If you’re working on building credit, secured credit cards could be a better fit. Always compare interest rates, rewards, and fees.
Yes, but only if you’re an authorized user. Being an authorized user means the primary account holder has explicitly given you permission to use their card. While the authorized user can make charges, the primary cardholder is ultimately responsible for the balance.
Don’t panic! Contact your credit card issuer immediately. Most credit card issuers will work with you to find a solution, which may include a payment plan or temporary hardship program.
For any questions or concerns, reach out to your credit card issuer’s customer service department. They can assist with billing inquiries, payment options, and other account-related questions.
The Bottom Line on Age Requirements and Credit Cards From CreditNinja
While you must be at least 18 years old to have your own credit card, there are still ways to build a good credit history. Check out the CreditNinja Dojo for more information on credit cards. Learn if you can use a credit card for a car down payment, how often you should apply for a credit card, and more!